Which of the Following Statements About Probabilities Is INCORRECT

question 82

Multiple Choice

Which of the following statements about probabilities is INCORRECT?

• A)The sum of all probabilities of a particular event must sum to 100%.
• B)Each possible outcome must have a non-negative probability.
• C)Probability is a statistical tool for estimating future outcomes.
• D)Probability is associated with an ex-post view.

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Definitions:

Abnormal Return

Return on a stock beyond what would be predicted by market movements alone. Cumulative abnormal return (CAR) is the total abnormal return for the period surrounding an announcement or the release of information.

Mean-Variance Optimizers

Tools used in finance to allocate assets in a portfolio in a way that maximizes return for a given level of risk based on the expected returns and variances of those assets.

Fully Informed

A state or condition where all relevant information is known to all parties involved.

Security-market Line

A graphical representation of the relationship between expected return and beta (systematic risk) of an investment.